Weekly Investor – November 26, 2018
A Rough Quarter Continues
Last week the S&P 500® Index continued its downward trend with a 3.8% drop. While the index returned 10.6% in the first three quarters of 2018, the decline in the fourth quarter has currently erased those gains. Equity markets started the week on a sour note after US Vice President Mike Pence and Chinese President Xi Jinping exchanged harsh rhetoric at the Asia-Pacific Economic Cooperation meeting. Importantly, President Trump and President Xi are expected to meet this weekend at the G20 summit in Argentina.
Information technology and energy led the decline last week with all sectors in negative territory. Signs of oversupply continue to weigh on crude oil prices and the energy sector in general. Crude oil declined 10.7% last week and closed at its lowest price since early October 2017. Technology giant Apple dropped on reports that the company cut production orders of iPhones as demand appears to be declining. The stock lost 11.0% last week. Nvidia Corp, a semiconductor manufacturer of graphics processors and software, was also hit hard during the week. The stock dropped 18.8% the previous Friday after missing earnings and sales estimates and lowering fourth quarter revenue guidance.
The S&P 500 was down 3.8% for the week. Its top-performing sectors were Utilities (-1.3%) and Real Estate (-1.5%), while bottom-performing sectors were Energy (-5.1%) and Technology (-6.1%). In the fixed-income market, the 10-year Treasury yield was even, ending at 3.1%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change-Based Investment
First Data Corporation (FDC), headquartered in Atlanta, Georgia, is a global leader in e-commerce technology. The company processes almost 50% of all U.S. credit and debit transactions, including handling pre-paid gift cards.
Although First Data has struggled to turn itself around in the past, the company is realizing success, thanks in part to CEO Frank Bisignano (former executive at JPMorgan Chase), who joined the company in 2013. First Data has reported improved sales growth overall, particularly within its Global Business Solutions segment. While we do not expect the improvement to be straight-lined in nature, First Data is inexpensive relative to its competitors, and that gives us confidence. Because of these significant changes, we feel First Data offers upside potential for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.7% |
| Post Holdings, Inc. | 5.5% |
| MasterCard, Inc. | 4.3% |
| JP Morgan Chase & Co. | 4.3% |
| Red Hat, Inc. | 4.2% |
Small Cap Core
| Wintrust Financial Corp | 2.9% |
| Merit Medical Systems | 2.9% |
| Fortinet Inc. | 2.8% |
| Planet Fitness, Inc. | 2.5% |
| G-III Apparel Group LTD | 2.5% |
Dividend Select
| JPMorgan Chase & Co. | 5.9% |
| Pfizer, Inc. | 4.5% |
| ConocoPhillips | 4.2% |
| Occidental Petroleum | 4.1% |
| Life Storage, Inc. | 3.7% |
Mid Cap
| Amedisys, Inc. | 3.5% |
| CDW Corporation | 3.4% |
| Cintas Corporation | 3.2% |
| Helen of Troy Ltd. | 3.0% |
| Bright Horizons Family | 2.9% |
This newsletter presents selected recommendations from portfolio managers of Argent Capital Management LLC, a registered investment advisor. Opinions reflect the portfolio manager’s judgment on the date above and are subject to change. A list of stocks recommended by Argent is available upon request. You should not assume that these recommendations are or will be profitable. In the course of it’s business, Argent’s client accounts may be buying and selling these stocks.
